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New Gold announces Q3 results and reaffirms consolidated production and cost guidance

Nov 06, 2019 (MarketLine via COMTEX) --

New Gold has reported third quarter and nine-month results for the Company as of September 30, 2019 and reaffirms that the Company remains on-track to achieve consolidated annual production and cost guidance. (All amounts are in U.S. dollars unless otherwise indicated).

Third Quarter and Nine-Month Highlights

Total production for the quarter (excluding production from the Cerro San Pedro Mine) of 128,899 gold equivalent (gold eq.) ounces (91,087 ounces of gold, 168,159 ounces of silver and 20.1 million pounds of copper). For the nine-month period, production was 384,719 gold eq. ounces (255,701 ounces of gold, 455,977 ounces of silver and 61.2 million pounds of copper). Production is on track to meet annual guidance of 465,000 to 520,000 gold eq. ounces.

Revenues for the quarter were $168 million and $491 million for the nine-month period.

Operating expense of $761 per gold eq. ounce1 for the quarter and $695 per gold eq. ounce for the nine-month period.

Total cash costs of $819 per gold eq. ounce1,2 for the quarter and $751 per gold eq. ounce for the nine-month period. Total cash costs are on track to meet annual guidance of $740 to $820 per gold eq. ounce.

All-in sustaining costs (AISC)1,2 of $1,318 per gold eq. ounce for the quarter and $1,161 for the nine-month period. AISC for the year are expected to achieve the low-end of the annual guidance of $1,330 to $1,430 per gold eq. ounce as sustaining capital at Rainy River is expected to be below annual guidance.

Net loss from continuing operations for the quarter was $25 million ($0.04 per share) and $74 million ($0.13 per share) for the nine-month period.

Adjusted net loss2 from continuing operations for the quarter, which excludes other gains and losses, was $10 million ($0.02 per share) and $19 million ($0.03 per share) for the nine-month period.

Operating cash flow generated from continuing operations for the quarter was $91 million ($0.15 per share) and $216 million ($0.37 per share) for the nine-month period. Operating cash flow generated from continuing operations for the quarter, before non-cash changes in working capital2, was $67 million ($0.11 per share) and $199 million ($0.34 per share) for the nine-month period.

On August 30, the Company completed a bought deal financing for gross proceeds of C$150 million, the net proceeds of which were used primarily for debt repayment, with approximately $100 million of the Company’s 2022 senior unsecured notes repurchased for cancellation. Following this, the Company had available liquidity of $421 million, including $135 million in cash and cash equivalents.

“The Company has delivered another quarter of improving operational and cost performance from both assets as we continue to advance our short-term operational plan and reposition the company for long-term success. The quarter over quarter improvement in our performance has underpinned the completion of a strategic equity financing during the quarter, which allowed us to reduce our debt position by $100 million and strengthen our balance sheet.” stated Renaud Adams, CEO. “We will maintain our diligent focus on completing substantially all remaining construction projects at Rainy River in order to reposition the asset for efficient and sustainable mining, as we continue to advance C-zone development at New Afton. We continue to advance our updated life of mine plans for Rainy River and New Afton, which are expected to be released in mid-first quarter of 2020 and provide a path forward that is premised on maximizing profitability and shareholder value creation.”

Revenues for the quarter from continuing operations were $168 million, an increase over the prior-year quarter due to an increase in gold ounces sold and an increase in average realized price of gold and silver, offset by a decrease in the average realized copper price.

Operating expenses for the quarter were $95 million, an increase over the prior-year quarter due to higher sales volume and increased throughput at planned lower grades and an increase in operating waste tonnes mined at Rainy River.

Net loss for the quarter was $24.7 million ($0.04 per share), an increase in loss over the prior year quarter due primarily to unrealized losses on the revaluation of derivative instruments.

Adjusted net loss for the quarter was $10.3 million ($0.02 per share), which is an increase in loss over the prior year quarter due to an increase in depreciation and depletion associated with higher sales volumes.

The Rainy River Mine reported gold eq. production of 76,092 ounces (75,080 ounces of gold and 87,705 ounces of silver). Ore production during the quarter included planned lower grade ore from Phase 2 as well as remaining higher-grade ore from Phase 1, as mining operation continued the transition from Phase 1 to Phase 2 of the mine plan. As the ore from Phase 1 is now mined out as planned, grades mined in the fourth quarter are expected to decline and average between 0.8 and 1.0 grams per tonne. For the nine-month period, production was 205,135 gold eq. ounces (202,650 ounces of gold and 214,245 ounces of silver).

As previously reported, during the second half of the quarter and into October, the operation experienced periods of significant rainfall, causing an increase in water levels in the Tailings Management Area (the “TMA”). In late October, the planned 2.5 metre raise of the spillway was completed, which provides approximately 7 to 8 million cubic meters of additional TMA capacity. During the month of October, the mill operated at lower capacity in order to manage water levels in the TMA. Scheduled maintenance previously planned for later in the fourth quarter was completed during this time. In October, the mill facility averaged approximately 18,000 tonnes per day and is expected to operate at full capacity over the balance of the year. As a result of lower throughput achieved in October and lower grades planned for the fourth quarter, the mine is on track to achieve the lower end of annual production guidance of 250,000 to 275,000 gold eq. ounces.

Operating expense per gold eq. ounce was $922 for the quarter, a 21% increase over the prior year quarter, due to an increase in operating waste tonnes mined and increased throughput at planned lower grades. For the nine-month period, operating expense per gold eq. ounce was $876, a decrease over the prior year period due to increased gold ounces sold.

Total cash costs per gold eq. ounce were $922 for the quarter and $877 for the nine-month period, on-track to achieve annual guidance of $870 to $950 per gold eq. ounce.

Sustaining capital and sustaining lease payments for the quarter were $46.3 million and $110.0 million for the nine-month period. During the quarter, activities included the advancement of the Stage 2 TMA dam construction, purchase and renovation of the camp facility, installation of wick drains for stabilization of the east waste dump as well as final commissioning of the water treatment plant. Sustaining capital and sustaining lease payments estimates for the year are expected to be $175 to $190 million, which is below guidance estimates, due to cost reductions of approximately $15 million related to the TMA and the rescoped maintenance and warehouse facilities, as well as the deferral of capital to 2020 of approximately $20 million.

AISC per gold eq. ounce were $1,593 for the quarter, which included $7 million of capitalized mining costs (approximately $92 per eq. ounce) and $39.3 million of other sustaining capital expenditure and lease payments. AISC per gold eq. ounce for the quarter increased by 3% over the prior year quarter due to an increase in sustaining capital and leases coupled with an increase in mining costs per ounce, offset by an increase in gold sales. For the nine-month period, AISC per gold eq. ounce were $1,413. Due to the lower than planned sustaining capital noted above, as well as the lower gold equivalent production and sales expected in the fourth quarter, AISC is expected to achieve the lower end or below annual guidance of $1,690 to $1,790.

During the quarter, approximately 1.7 million ore tonnes and 8.5 million waste tonnes (including 1.6 million capitalized waste tonnes) were mined from the open pit at an average strip ratio of 5.10:1 as Phase 2 waste stripping continued to be prioritized during the quarter. Additionally, 2.6 million tonnes of out-pit material were mined during the quarter in preparation for planned dam raises over the balance of the year.

Mill throughput for the quarter averaged 24,500 tonnes per day, the first full quarter the mill operated at the target range of 24,000 tonnes per day. Mill availability for the quarter averaged 88%, achieving target levels as all major mill upgrades are substantially completed. As the mill has demonstrated consistent operations at target levels, there remains potential for further increases in mill throughput as mill availability improves over the coming quarters.

Gold recovery averaged 91% for the quarter, in-line with plan. Efforts continue to focus on achieving additional circuit optimizations as well as commissioning of the gravity circuit, which could further improve recoveries.

During the quarter, the Company advanced a comprehensive mine optimization study that includes the review of alternative open pit and underground mining scenarios with the overall objective of reducing capital and improving the return on investment over the life of mine. Results are now scheduled for release during the first quarter of 2020, but by no later than mid-February, in conjunction with the Mineral Reserves and Resources update and the Company’s 2020 guidance estimates.

As operational performance has improved over the past four quarters, the focus is now shifting from stabilizing operations to optimizing operational and cost performance. To support that initiative, the Company expects to engage an external consultant to support improved overall equipment efficiencies with the objective of optimizing open pit mining productivity and unit cost performance.

Exploration activities continued in the third quarter, which included reconnaissance work in the northeastern portion of the broader Rainy River land package with the objective of identifying targets for follow up drilling in 2020.

The mine produced 52,807 gold eq. ounces for the quarter (16,007 ounces of gold and 20.1 million pounds of copper) and 179,584 (53,051 ounces of gold and 61.2 million pounds of copper) for the nine-month period. The mine is on track to achieve annual production guidance of 215,000 to 245,000 gold eq. ounces.

Operating expense per gold eq. ounce was $545 for the quarter and $473 for the nine-month period. Operating expense per gold eq. ounce has increased as compared to the prior year period due to decreased gold equivalent sales due to the lower copper price.

Total cash costs per gold eq. ounce was $682 for the three months ended September 30, 2019 and $596 per gold eq. ounce for the nine months ended September 30, 2019. Total cash costs per gold eq. ounce have increased as compared to the prior year period, driven by the higher operating expense per gold eq. ounce. Total cash costs are expected to achieve the higher end of annual guidance of $600 to $640 per gold eq. ounce, primarily due to the lower gold equivalent ounces from the lower copper price.

Sustaining capital and sustaining lease payments for the quarter were $9.7 million, and $27.4 for the nine-month period primarily related to B3 mine development and a tailings dam raise. Sustaining capital is expected to be slightly below annual guidance of $45 to $55 million due to improved cost efficiencies realized on development meters, as well as the deferral of other capital projects to the fourth quarter with payment of these projects now expected in the first quarter of 2020.

AISC per gold eq. ounce for the three months ended September 30, 2019 were $869 and AISC per gold ounce (net of by-product credits) were ($586). For the nine months ended September 30, 2019, AISC per gold eq. ounce were $761 and AISC per gold ounce (net of by-product credits) were ($663). Although sustaining capital spend is expected to be slightly lower than the annual guidance range, the impact is offset by the decrease in expected gold equivalent sales due to the decrease in copper prices and as a result AISC remains on track to achieve the annual guidance range of $810 to $890 per eq. ounce.

Growth capital was $8.2 million for the three months ended September 30, 2019, $13.6 million for the nine months ended September 30, 2019 primarily related to C-zone development. Growth capital spend is expected to be slightly below annual guidance of $40 to $45 million due to realized cost efficiencies in development metres, as well as the impact of working capital as higher than planned activity is expected in fourth quarter with payments now expected in the first quarter of 2020.

Mining and milling performance were in-line with planned levels for the quarter, achieving 15,773 tonnes mined per day and 15,572 tonnes milled per day, at gold recovery of 80% and copper recovery of 84%.

The second phase of a planned mill upgrade to address supergene ore recovery advanced during the quarter. Key equipment has been installed and commissioning is expected during the fourth quarter.

Efforts during the quarter continued to focus on de-risking the execution of the C-zone project, primarily focusing on the finalization of the tailings disposal plan and advancing permitting efforts. An updated life of mine plan is expected to be completed in the first quarter of 2020. Sub-level cave (SLC) definition, mining operability and sequencing will continue to be further defined for potential incorporation of the SLC zone into the mine plan. By the end of the quarter, exploration-heading development towards the C-zone has been advanced by approximately 720 metres.

The New Afton delineation and exploration programs are currently underway and include three key initiatives: 1) underground drilling to delineate and expand mineral resources within the SLC Zone, located to the east of the planned B3 block cave; 2) underground exploration drilling of the D-zone target to test the potential for additional mineral resources down plunge of the C-zone block cave mineral reserve; and 3) surface geochemical surveys along the prospective Cherry Creek trend located within three kilometres of the New Afton mill (see May 29, 2019 press release). The regional exploration program advanced during the quarter and focused on refining follow-up drilling targets in the Cherry Creek trend area that could be included in the drilling program, which is currently scheduled to begin in the fourth quarter.

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